Bosses at West Suffolk Hospital in Bury St Edmunds have criticised the marginal rate rule after millions of pounds of cash was kept back under a Department of Health formula.

Under the rule, hospitals receive 100% of funding for treating A&E patients up to a baseline level, and then only 30% for any extra patients beyond the baseline figure.

The rest of the funding is handed to commissioners to invest in services to prevent patients attending A&E, such as GPs or primary care.

In 2012/13, the hospital was handed £1.4million for treating emergency admissions above the baseline, when it would have been awarded £4.5m under the full tariff. The equivalent figure was around £1m in the previous two years.

Craig Black, executive director of resources at the hospital, said: “Demand for our services is growing, with hospitals across the country treating increasing numbers of emergency patients every year. The marginal tariff, which is set nationally by the Department of Health, places us under additional pressure in what is already a challenging financial climate.”

A poll by the Foundation Trust Network, which represents more than 200 NHS organisations, found that 96% of its members felt the money was not being reinvested effectively elsewhere.

NHS England and patient watchdog Monitor published a review of the rule last year and resolved to keep it for 2014/15, but with some changes. These include adjusting the baseline figures and asking for greater transparency and planning from commissioners on how the money is invested away from A&E.

Chris Hopson, chief executive of the Foundation Trust Network, said: “We are disappointed that this arbitrary penalty on hospitals remains. Monitor and NHS England are trying to have their cake and eat it – insisting that A&E targets are met, but requiring hospitals to treat increasing numbers of emergency admissions for just 30% of the cost of doing so.

“Paying hospitals for the full cost of all the patients they treat would have been the quickest, simplest and best way of solving these problems.”

Wendy Tankard, chief contracts officer for the NHS West Suffolk Clinical Commissioning Group, which commissions services and decides where money not spent in A&E is used, said: “The West Suffolk CCG follows national Department of Health guidance on payments made to West Suffolk Hospital for the treatment of emergency patients.”